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    Itaipu uses R$1 billion from the electricity bill to play politics for the PT

    September 21, 2023 - CE Noticias Financieras


      The expansion of the area of influence of the Itaipu hydroelectric dam on the Brazilian side has caused discomfort in the energy sector. The region entitled to receive socio-environmental and infrastructure projects has increased from 55 to 434 municipalities, bringing the cost to almost R$1 billion (US$193.9 million). Experts question the political and geopolitical use of Itaipu with the money from the electricity bill.

      The expansion of the area and the robust budget support the creation of the "Itaipu More than Energy" program to serve all 399 municipalities in Paraná and another 35 in Mato Grosso do Sul. Originally, areas close to river basins in the region benefited. Now, even beach towns.

      Itaipu's new director-general, Enio Verri, has also announced R$ 600 million over three years for the completion of Unila (Federal University of Latin American Integration), which would bring investments in the region to R$ 1.2 billion this year.

      People close to the PT say that Verri was chosen to carry out a kind of review of the plant's line of work. He must bring Itaipu into the political arena, as opposed to the management of Jorge Samek, who, from 2003 to 2017, shielded the binational company in this area.

      The current board of directors has five ministers, which is also seen as a way of aligning management with federal government guidelines. In addition to the seat reserved for the Minister of Foreign Affairs - occupied by Mauro Vieira - there are Rui Costa (Chief of Staff), Fernando Haddad (Finance), Esther Dweck (Management) and Alexandre Silveira (Mines and Energy).

      A former federal deputy for the PT, Verri has the support of Gleisi Hoffmann, the party's president, for the post and has made numerous contacts. The word in Paraná's political circles is that he is preparing to run for the Senate or even for state government in the 2026 election.

      The PT is currently weakened in the two states benefiting from the new program.

      In the second round of the elections, Luiz Inácio Lula da Silva (PT) had 37.60% of the votes against 62.40% for Jair Bolsonaro (PL). In Mato Grosso do Sul, Lula's performance was slightly better: 40.51%. The release of resources from a PT administration in Itaipu for the entire region creates a rapprochement, local politicians believe.

      The "Itaipu More than Energy" launch event in Foz do Iguaçu, held at the end of August, brought together representatives from practically all the municipalities. Those applying for Itaipu funds are told that it is a kind of donation, with "little bureaucracy". An agreement with Caixa will also "facilitate access and application" of the investment.

      What bothers energy experts is that Itaipu's money comes out of Brazilians' electricity bills.

      Under the treaty, Brazil and Paraguay share the energy half and half. As the Paraguayans don't consume all their share, they sell it to Brazil. As a result, around 85% of the tariff comes out of Brazilians' pockets. Distributors in the South, Southeast and Midwest are obliged to buy this energy.

      The obligation was established to guarantee the repayment of the billion-dollar debt contracted for the construction of the hydroelectric plant. This debt, however, was settled in March of this year. Following the binational treaty to the letter, the amount corresponding to this cost should simply have been extinguished, relieving the energy tariff - which was not done in full.

      A study carried out during the past administration shows that, with the end of the debt, the cost of generating energy from Itaipu should have fallen to between US$ 9 and US$ 10 per kW (R$ 43.63 to R$ 48.50 per kilowatt). Bolsonaro's administration set the price for this year at US$12.67 (R$61.42), but without negotiating with the Paraguayans. The administration of Luiz Inácio Lula da Silva (PT) took over and settled with the partner at US$ 16.71 (R$ 81).

      "They found a way to circumvent the debt reduction against the Brazilian consumer, because it doesn't let the tariff fall as it should," says Edvaldo Santana, former director of Aneel (National Electric Energy Agency).

      The bill for projects and works was already rising. Presidents Michel Temer and Bolsonaro have announced projects with an impact on the region, but Lula has guaranteed unprecedented resources. According to a survey carried out by PSR, one of Brazil's most respected consultancies, spending on Itaipu's so-called socio-environmental responsibility programs rose from US$ 88.5 million in 2013 to US$ 316.1 million last year.

      It now stands at US$ 505 million (R$ 2.5 billion). In other words, the fact that the electricity bill doesn't fall in proportion to the cost of the ex-debt frees up around US$250 million for each country to finance projects in their interests.

      "It's absurd and bad for society as a whole that, once the debt is over, consumers in Brazil are still obliged to subsidize works. What's the point of the owner of a freezer in a bar in Rio de Janeiro paying his electricity bill for a road in Paraguay, Paraná or Mato Grosso do Sul?" asks Rodrigo Ferreira, president of Abraceel (Association of Energy Traders), an advocate of the free energy market.

      "This is only happening because there is no competition in the sector for everyone, because if there were, the government would be obliged to offer Itaipu's energy at the lowest cost, and not keep it among the most expensive in Brazil."

      Lula's administrations have a history of making concessions to Paraguay with Itaipu. The reading is that, given the president's commitment to placing Brazil at the forefront of the region, the current government will further reinforce the old argument that it is the Paraguayans who are preventing a more pronounced reduction in Itaipu's tariff.

      "We have two major problems here," says Claudio Sales, president of the Acende Brasil Institute, which has been studying the power plant's financial flows between the two countries.

      "First, an unwritten conspiracy between Brazil and Paraguay to inflate an expense, using the energy tariff and knowing that this is paid for by the Brazilian consumer. The other is the misallocation of the money, which favors all of Paraguay and, in Brazil, only the state of Paraná and part of Mato Grosso do Sul."

      According to Sales, if there were a minimum of economic and social awareness, governments would be reducing electricity bills. "There's nothing fairer than cheap energy for everyone," he says.

      Itapu's annual budget needs to be paid in full, as there can be no surplus from one year to the next. In Paraguay, there is even monthly monitoring of disbursements.

      Those who question the initiative believe that the agreement with Caixa, in this respect, is an instrument to guarantee the transfer and write-off of the funds, even if the projects come from the town halls. According to Folha , it's still a puzzle which channel will be used to transfer funds to the university.


      In a statement, the hydroelectric company's advisors said that "Itaipu's mission, as stated in the strategic plan approved by the board of directors, is to generate quality electricity, with social and environmental responsibility, contributing to sustainable development in Brazil and Paraguay", and that all efforts are guided by this premise.

      Also according to the note, "'this mission was endorsed in 2005, through Reverse Notes between the Ministries of Foreign Affairs of the two countries, which determined the permanent insertion of Itaipu Binacional's initiatives in the field of social and environmental responsibility in the energy generation activity, in line with the mission, policies and guidelines set by the board of directors".

      The text points out that all the plant's management actions are "strictly guided" by a legal framework that regulates internal procedures. It also says that the use of Itaipu's resources follows "guidelines established binationally between Brazil and Paraguay."

      With regard to what it describes as "political speculation", it stresses that the company's focus is on a "neutral stance aligned with the federal government's plan and the interests of the community".

      It also stresses that the director-general has no political pretensions. "Enio Verri is dedicating his energy and focus to projects and activities aimed at the well-being of the company." It also states that he has no plans to enter political contests.


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